DBRS Confirms Chevron Corporation at AA with a Stable Trend

DBRS has today confirmed the Senior Unsecured Notes and Debentures rating of Chevron Corporation (Chevron, CVX or the Company) at AA with a Stable trend. CVX’s ratings are supported by its very strong financial profile, which compares favourably with its multinational peer group. Current credit metrics are very strong, with debt-to-capital of 7.4% and debt-to-cash flow of 0.25 times for LTM (last 12 months) September 30, 2011. In addition, debt levels continue to be low and are manageable as Chevron’s cash flows continue to be very strong.

Chevron’s business profile remained solid, driven largely by the size, diversification and focus on upstream operations. The diversification of its portfolio of large assets and economies of scale stemming from its size and operational integration further strengthen its credit profile.

During LTM September 30, 2011, the Company was able to maintain its strong free cash flow position despite significant spending on acquisitions, short term investments, equity buyback and debt reduction, and aided by a significant inflow from asset sales.

Despite its strengths, Chevron’s large size and diversified operations does pose certain risks as well. Large capex spending could reduce liquidity during a large economic downturn. In addition, many operational and development projects are focused in areas where political risk is higher, such as China, South America and Africa. Also, the Company has a significant number of deepwater drilling operations, which are typically high cost and come with a high level of operational risk. However, the size of the Company’s operations helps to mitigate these risks.

On December 14, 2011, it was reported that litigation would be filed by the Brazilian federal district prosecutor against Chevron and other companies seeking $10.7 billion in damages and an injunction to stop Chevron’s activities in Brazil. Given the early stages of the reported litigation, it is too early to determine what impact, if any, this would have on Chevron’s operations in Brazil.

Chevron continues to be one of very few multinational operators with the ability to withstand economic downturns.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on our website under Methodologies.